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Explainer: South China Sea - Asia's most dangerous waters

Picture by the Vietnam News Agency showing live fire drills June 14 on Phan Vinh Island in the disputed Spratly Island chain.

STORY HIGHLIGHTS

Fears grow South China Sea row is creating a new Cold War in Southeast Asia

China claims there is enough oil in the sea to rival Saudi Arabia's proven reserves

China, Vietnam, the Philippines, Malaysia, Brunei and Taiwan all have sea claims there

Vietnam and the Philippines have strengthened U.S. military ties as tensions rise

Hong Kong (CNN) -- The South China Sea -- a 1.3 million square mile patch of the Pacific Ocean bracketed by China and several Southeast Asian nations -- is dotted with hundreds of largely uninhabited islands and coral atolls that are home to some of the world's most diverse marine life.

Also under its waves lie potentially huge reserves of natural gas and oil. A Chinese estimate suggests as much as 213 billion barrels of oil lie untapped in the South China Sea which, if true, would make it the largest oil reserve outside Saudi Arabia, according to the U.S. Energy Information Administration.

That prospect has cross-stitched the sea with competing claims from China, Vietnam, the Philippines, Malaysia, Brunei and Taiwan. A recent spate of incidents between Chinese and Vietnamese vessels in the sea has fueled a growing rift between the communist neighbors, creating strange bedfellows as Hanoi embraces closer military ties with historic foes in Washington.

The South China Sea has now become a petri dish for swirling changes churning the geopolitical landscape, analysts say, as the rising power of China butts up against the established economic and military might of the U.S.

"How these disputes are resolved will tell us how politics in Asia is going to play out in the next 20 to 30 years," said Mark Valencia, a fellow at the National Asia Research Program and expert on the South China Sea dispute. "This will be the blueprint."

Why is this happening now?

Map: South China Sea dispute

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The competing stakes in the South China Sea are nothing new: territorial claims to the islands stretch back decades, even centuries, according to some of the nations vying in the sea grab.

The dispute took center stage earlier this month when defense officials from 28 Asia-Pacific nations gathered at the Shangri-La hotel in Singapore. China, for the first time, sent its top soldier to the annual meeting -- General Liang Guanglie -- who spoke at length about China's peace-loving nature and focus on cooperative development and security in the region.

His olive branch was met with skepticism, said Alan Dupont, a regional security analyst who was at the meeting. "It was a packed hall, and there were a lot of hostile questions directed to China from (participants from) Asia and the United States," said Dupont, director of the Centre for International Security Studies at the University of Sydney.

Many questions seem to reflect a fear of growing Chinese assertiveness in the disputed waters. In late May, the Vietnamese Ministry of Defense reported that a Chinese patrol boat slashed a submerged cable of a oil and gas survey ship operated by PetroVietnam, the state energy firm. A similar incident happened on June 9 -- just four days after Liang's address -- when a Chinese patrol boat cut cables from a Vietnamese ship doing seismic surveys off its southern coast, Vietnam's Foreign Ministry reported. Beijing maintains that Vietnamese vessels have been illegally surveying in Chinese waters and harassing Chinese fishing boats.

Vietnam is not the only nation skirmishing with Chinese patrol boats. The Philippines, on the western border of the South China Sea, also reported Chinese boats cutting cables of a survey ship and threatening to ram its boats in March, according to Manila's Foreign Ministry.

China claims both nations were exploring in disputed waters. China says it is not to blame. "If you want to know why there is tension in South China Sea, I think you have to go and ask the country or countries that have made all the provocations," Cui Lei, China's vice minister of the Foreign Ministry, told CNN in a rare interview last week

How much oil and gas is under the sea?

Vietnamese live-fire drill irks Beijing

How these disputes are resolved will tell us how politics in Asia is going to play out in the next 20 to 30 years--Mark Valencia, National Asia Research Program

China claims there could be enough oil and gas to rival Saudi Arabia's reserves, but those claims have yet to be proven, according to a U.S. Energy Information Administration report. Still, there are enough proven wells in the South China Sea to tantalize the players, which explains why oil and gas survey vessels are at the heart of the recent incidents.

"I think the critical reason now in the increase in tension is the rising energy insecurity in the region, particularly in China," Dupont said.

The smaller nations in the region are feeling the pressure to stake their claims for oil and fishing rights, or risk losing them to a more assertive China, analysts say.

"There's a sense coastal states like Vietnam and the Philippines need to use the economic area more urgently, so they need to catch more fish now, they need to discover more oil now," said James Manicom, an expert on maritime disputes at the Balsillie School of International Affairs in Waterloo, Canada.

Why do so many nations claim the waters?

At the heart of both disputes is a term of international maritime law known as "Exclusive Economic Zone," where nations are allowed sole rights to fish and develop resources within 200 nautical miles of a country's shores. That has created interest in nations' grabbing uninhabited islands -- often little more than rocky atolls -- to extend their zone.

China lays the broadest claim, covering all of the Spratly Islands in the southern part of the ocean and Paracel Islands to the north -- essentially most of the South China Sea. Taiwan and Vietnam also claim the entirety of both island groups, while Malaysia, Brunei and the Philippines say they own part of the Spratlys. All but Brunei occupy some of the disputed islands with naval bases, airstrips and even resorts.

"It seems to me in East Asian states that if you act like you own a piece of a claim, you do -- possession is nine-tenths of the law," Manicom said.

Whether it's right or wrong, China is looking like the bad guy--James Manicom, Balsillie School of International Affairs

There is plenty of oil being produced along the undisputed coastal areas of the South China Sea -- Brunei, Malaysia and Vietnam are all net oil exporters while China also produces a chunk of its offshore oil from the South China Sea, said Kang Wu, an energy expert at the East-West Center in Honolulu.

"If they want further develop production and reduce the decline of aging oil fields, a move into deeper water for drilling has become important for every country involved," Wu said.

What's the U.S. stake in this?

Last week the U.S. -- which has a defense treaty with the Philippines -- agreed to help modernize Manila's military during a Washington visit by Foreign Secretary Albert del Rosario. "While we are a small country, we are prepared to do what is necessary to stand up to any aggressive action in our backyard," del Rosario said at a press conference with U.S. Secretary of State Hilary Clinton.

The United States waded into the water dispute a year ago when Clinton attended the annual defense meeting at the Shangri-La in Singapore. Clinton rattled Beijing when she offered to mediate the dispute and suggested a peaceful outcome was in U.S. national interests. At the time, Chinese Foreign Minister Yang Jiechi called Clinton's comments "an attack on China."

Washington changed tack last year after a high-level defense meeting in which Beijing told the U.S. that the South China Sea was a "core security concern for China," Dupont said. "Previously only Tibet, Xinjiang and Taiwan were mentioned as a 'core security concern'."

Beijing considers Taiwan a renegade province and struggles with separatists movements in Tibet and Xinjiang, so having the South China Sea mentioned in the same breath "really raised alarm bells in Washington, and brought Clinton to Singapore," Dupont said.

The shipping lanes of the South China Sea are among the busiest in the world and a vital lifeline for China's growing hunger for commodities such as oil, natural gas and iron ore.

To hedge against a more assertive China, Southeast Asian nations are turning to Washington. Vietnam and the U.S. have announced a new round of joint military exercises, and the U.S. recently held joint drills with the Philippines. "There have been rapid defense engagements (with the U.S.) in the past 12 months," Dupont said. "The Philippines is welcoming the U.S. back after kicking them out of their naval bases a few years back."

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"This is an opportunity for the U.S. to get back in Asia in a big way," Manicom added.

Who's the bad guy here?

General Liang's charm offensive in Singapore earlier this month -- and a similar trip to the Philippines after the March incident with a Filipino vessel -- shows Beijing's concern about rising tensions in the region, analysts say. But several cautioned that blaming China would be a misinterpretation of the forces at work in the South China Sea.

Nations liberally interpret maritime treaties to their own advantage, experts said. "There is a sense of sanctimoniousness on all sides," said Valencia. He points out the U.S. regularly cites the UN Convention on Law of the Sea -- which allows free navigation of seas within the 200-nautical mile "Exclusive Economic Zones" at the heart of the South China Sea debate. Yet the U.S. has never actually ratified the treaty.

"What they're talking about is free reign for their spy ships and planes," Valencia said. "From the China perspective its, 'yeah, you have right to freedom of navigation, but does that mean you can stick an EP-3 (U.S. Navy reconnaissance plane) up our nose anytime you want?' "

In recent disputes with Vietnam and the Philippines, "China says it was not the one who made the first move," Wu said. "China claims that these other countries went deeper into disputed areas. The reaction from China is believed to be firmer than in the past. On the one hand, a firmer reaction is different from a muted reaction. On the other hand, firmer doesn't mean China is about to take over the disputed areas by force."

China's Foreign Vice Minister Cui told CNN: "China has done everything possible to maintain stability in the region, and we always believe that any disputes, any possible disputes over territory, over the water in the South China Sea, should be resolved through bilateral negotiations and dialogue," Cui said. "We still have the same position now."

While China apparently wants to iron out territorial disputes individually with each country involved, its neighbors have other ideas. "The Southeast Asian nations are now starting to get together and talk about common approaches to China, which is the last thing Beijing wants," Dupont said.

We're at a tipping point here at the moment and the next 12 or 18 months could be very important--Alan Dupont, Centre for International Security Studies

The growing rift has eroded much of the goodwill China has built with its neighbors as all economies in the region benefited from Beijing's rise in financial clout, overtaking Japan last year as the world's second wealthiest nation, analysts say. "Whether it's right or wrong, China is looking like the bad guy," Manicom said. "That perception is a problem."

Why are the stakes rising?

The fear on all sides is that the rising tenor of the South China Sea debate, coupled with increased U.S. military involvement, is creating a 21st Century Cold War in Southeast Asia. Tensions over a similar perennial dispute between China and Japan regarding a group of islands in the East China Sea boiled over last year when Japan arrested the crew of a Chinese sailing vessel, sparking nationalist demonstrations in both countries and a war of words at the highest levels between Tokyo and Beijing.

Similar demonstrations recently erupted in Vietnam over territorial claims in the South China Sea, and computer hackers from both sides have attacked websites in the opposing country, posting nationalistic images and messages, according to Chinese media reports. On Saturday Vietnamese and Chinese officials met and promised a peaceful resolution to the water dispute, according to China's Foreign Ministry. Yet on Sunday protesters gathered outside the Chinese embassy in Hanoi for the fourth consecutive week of demonstrations, according to local media reports.

There is increasing concern that nationalist sentiment could force nations to adopt a more belligerent tone both on the seas and in negotiations. "The big fear here is not that any of the countries want to have a conflict ... but as these tensions go up, countries get pushed into a position domestically that causes them to take a harder line," Dupont said. "The big concern is miscalculation, misunderstanding and misperception.

"We just came out of probably the most peaceful 25 years Asia has ever seen," Dupont added. "We're at a tipping point here at the moment and the next 12 or 18 months could be very important."